Netflix to Launch Advertising in Early 2023

Soon, Netflix will have a cheaper, ad-supported option for bingers to choose from. In the latest note to shareholders, the company announced it hopes to be ready to launch its ad-supported platform in early 2023. Exact pricing has yet to be unveiled, but the ad-supported version as already started being tested by subscribers in Latin America.

"Our lower priced advertising-supported offering will complement our existing plans, which will remain ad-free," the company said in a letter. "Our global ARM has grown at a 5% compound annual rate from 2013 to 2021, so it makes sense now to give consumers a choice for a lower priced option with advertisements, if they desire it."

The streamer unveiled last week it will partner with Microsoft for the ad platform.

"They are investing heavily to expand their multi-billion advertising business into premium television video, and we are thrilled to be working with such a strong global partner," the company said about its new Microsoft partnership. "We're excited by the opportunity given the combination of our very engaged audience and high quality content, which we think will attract premium CPMs from brand advertisers."

It added, "We'll likely start in a handful of markets where advertising spend is significant. Like most of our new initiatives, our intention is to roll it out, listen and learn, and iterate quickly to improve the offering. So, our advertising business in a few years will likely look quite different than what it looks like on day one."

In the same letter, Netflix said it lost one million subscribers in its second quarter, the second straight quarter it suffered a net subscriber loss. Again, the company put a partial blame on password-sharing.

"Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally. However, our relatively high household penetration – when including the large number of households sharing accounts – combined with competition, is creating revenue growth headwinds," the letter added. "The big COVID boost to streaming obscured the picture until recently. While we work to reaccelerate our revenue growth – through improvements to our service and more effective monetization of multi-household sharing – we'll be holding our operating margin at around 20%."